Crude oil production has been increasing in virtually all of the shale and tight oil plays that send their output to the storage and distribution hub in Cushing, OK. A number of pipeline projects are being built and planned to accommodate that growth, and — despite the fact that two-thirds of Cushing’s existing storage capacity is currently unused — several million barrels of new tankage is being installed at the hub, again in anticipation of incremental needs in 2019, 2020 and beyond. So it should come as no surprise that midstream companies also are planning a good bit of new pipeline capacity out of Cushing, some to refinery customers in the Midwest and Midcontinent areas but some to refineries and export docks along the Gulf Coast. Today, we continue our series on the “Pipeline Crossroads of the World” with a review of rock-solid and potential plans to enable more crude to flow out of the central Oklahoma hub.
There’s so much to say about Cushing that we’re now on our seventh blog — and we’ll still have more to discuss in Blog #8. We started off in Part 1 with a look at why the hub’s role in the crude oil market has been in flux in recent years — key factors being the surge in Permian production, the end to the ban on U.S. oil exports, and the resulting pull of crude to the Gulf Coast, with its concentration of refineries and export docks. Next, in Part 2, we took a deep dive into the 94 MMbbl of crude oil storage at Cushing — where it’s located (mostly South Cushing, with a little at North Cushing), the companies that own the storage, and how much they each own. We also split the users of Cushing storage into six categories (producers, midstream companies, refiners, marketers, or some combination thereof) and explained how each group uses its storage in different ways (some purely operational, some purely commercial and the rest some mix of the two).
In Part 3, we focused on the pipelines that transport crude oil to the Cushing hub from Western Canada, the Bakken, the Niobrara, the Permian, and within Oklahoma itself. Then, in Part 4, we looked at the pipes that transport crude oil out of Cushing to U.S. refineries and export terminals. About half of the existing pipeline capacity out of the central Oklahoma hub makes a beeline to the Gulf Coast on either Enterprise Products Partners and Enbridge’s jointly owned Seaway pipeline system or TransCanada’s Marketlink system. The other half of the pipeline capacity out of Cushing flows to inland refineries, the biggest of these pipes being the Ozark, Osage, Diamond, BP1 and Red River pipelines.
In Part 5, we turned our attention to (1) the characteristics of the crude flowing into Cushing, (2) the qualities of the crude flowing out, and (3) the activities going on within the hub that explain the differences between (1) and (2). To make a long story short, a lot of light crude (API gravity of 45 degrees or higher) and heavy crude (30 degrees or lower) flows in, but most of what flows out would be classified as medium-grade crude (30 to 45 degrees). Hence our assertion that Cushing might also be called “The Blending Capital of the World.” Finally, in Part 6, we reviewed the projects being implemented and planned to increase inbound pipeline capacity to Cushing and to add storage capacity within the hub.